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January 20, 2006
Misleading indicators
The EU's European Innovation Scoreboard was released last December, but there was small flurry of excitement last week when the European Commission sent out a press release "Innovation scoreboard: Mixed results that mentioned the "innovation" gap between the US and Europe. For example, the Financial Times and MSNBC ran this story: Europe's record on innovation '50 years behind US':
The European Union's record on innovation is so poor that it would take more than 50 years to catch up with the US, according to a survey presented by the European Commission on Thursday.
The Innovation Scoreboard compares the performance of the 25 EU countries with the US, Japan and several other nations, and ranks them according to factors such as the number of science and engineering graduates, patents, research and development spending and exports of high-tech products. The survey finds that only four EU countries -- Sweden, Finland, Denmark and Germany -- can compete with the US and Japan in terms of their innovative abilities.
However, this supposed comparison with the US is based on only partial data. As I have lamented before, the US does not have an innovation policy or a set of innovation indicators. We have a set of science and technology indicators. But that is not the same thing. Our S&T indicators measure R&D funding and the number of scientists and engineers as inputs and the number of patents as output. The US does not measure actual innovation, in the form of new products - nor do we measure non-technological innovation. European nations do, following the OECD Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data.
The Scorecard measures five areas. The first three are input measures:
* Innovation drivers measure the structural conditions required for innovation potential,
* Knowledge creation measures the investments in R&D activities,
* Innovation & entrepreneurship measures the efforts towards innovation at the firm level,
The last two are output measures:
* Application measures the performance expressed in terms of labor and business activities and their value added in innovative sectors, and
* Intellectual property measures the achieved results in terms of successful know-how.
These areas are broken down into a total of 25 specific statistics, such as number of science and engineering graduates, amount of public R&D expenditures, amount of private R&D expenditures, high tech exports, etc. In a number of specific statistics, there is no data for the US. This includes the key statistics of sales of new-to-market products and sales of new-to-firm not new-to-market products -- both of which are major indicators of innovation. Also missing from the US data are statistics on SMEs using non-technological change and employment in high-tech services -- again, some key measures. In all the US is missing 10 out 26 data points.
How can anyone compare the EU and the US when over a third of the data points -- and some of the most important data points are missing! To say that the EU is 50 years behind the US on innovation based on this study is absurd.
Yes based on R&D spending and the number of patents, Europe may very well be behind. But given that a large percentage of government R&D spending in the US is defense-oriented and given the problems with the US patent system turning out patents for anything and everything, I'm not even sure that statement holds up.
Apparently, politicians on both sides of the Atlantic (and even in Canada) are eager to raise the specter of falling behind the competition to press for more funds for S&T. I am all for increased funding. But let us not be blind to the fact that S&T is not innovation. And that increasing funding for S&T will solve our innovation problem. There are many other areas of innovation and many other innovative activities that need to be fostered and encouraged -- such as design and creativity -- if our nation is to succeed in the I-Cubed Economy.
But first, we need to get the damn statistics right. As they saying goes, that which is measured is managed. So, getting the measures wrong invariably means getting the policy wrong.
And so we stumble on in the darkness -- looking for answers in the wrong places like the drunk looking for his keys under the lamp post.
Posted by Ken Jarboe at January 20, 2006 8:10 AM
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